TAX LAW 1_DISCUSSION GUIDE 2_TAX ADMINISTRATION AND REMEDIES

Check reference on FUNDAMENTALS (138); and GENERAL Principles

A. Tax Administration

A. FUNCTIONS AND AGENCIES INVOLVED

Stages or processes of taxation.
A tax normally runs through three (3) stages.
(1) Levy. — It is the legislative act which determines that a tax of a certain amount or of a certain
percentage shall be imposed on the persons, properties, or acts subject thereto. (see 51 Am.
Jur. 614.) This action is made by the enactment of a tax law.

There cannot be an imposition of a tax without the amount or rate being fixed by law. An
undetermined tax is in law no tax. (1 Cooley 557.)

(2) Assessment. — It is the official action of an officer authorized by law in ascertaining the amount
of tax due under the law from a taxpayer. This action necessarily involves:
(a) the computation of the sum due;
(b) the giving of a notice to that effect to the
taxpayer; and
(c) the making, simultaneously with or sometime after the giving of the notice, of a demand upon
the taxpayer for the payment of the tax or deficiency stated.

(3) Collection. — It is, of course, the getting by the proper governmental agencies of the taxes
imposed. This stage embraces the different remedies for enforcement of the payment of
taxes including the criminal prosecution of violators of tax laws. The law sets down the time,
place, and manner of payment of taxes.

The responsibility in the assessment and collection of practically all national taxes is divided
between the Bureau of Internal Revenue and the Bureau of Customs.

Note: The levy of a tax should not be confused with the remedy of levy of real property for tax
delinquency. Assessment, as applied to internal revenue taxes, must be distinguished from
assessment of real property under the Local Government Code to determine its value for
purposes of taxation. (Chap. IV-L.) Collection would embrace the payment of tax by the
taxpayer or the voluntary compliance by him with his tax obligations.

Meaning of tax administration.

Tax administration refers to the manner and procedure of assessing and collecting or
enforcing tax liabilities.

There are, therefore, two (2) functions involved in tax administration, namely: assessment
and collection.

Administrative agencies and the courts.

(1) Bureau of Internal Revenue. — It is the administrative agency of the government charged with
the primary function of administration of the national internal revenue laws and regulations.
For administrative purposes, the Bureau is under the executive supervision and control of the
Department of Finance which oversees the administration of national taxes in the Philippines.
(see Sec. 2.)

(2) Bureau of Customs. — It is the administrative agency of the government charged with the
administration of the tariff and customs laws and regulations.’ (see N, infra.) For the
collection of the national internal revenue on imported articles, the Commissioner of
 Customs and his subordinates, together with the heads of appropriate government offices
and their subordinates and duly authorized banks, are constituted agents of the
Commissioner of Internal Revenue. (Sec. 12.)

Like the Bureau of Internal Revenue, the Bureau of Customs is specifically placed under the
administrative supervision of the Secretary of Finance. (see Secs. 7, 12, 33, E.O. No. 127.)
(3) Court of Tax Appeals. — It is the court vested by law with exclusive appellate jurisdiction,
among others, to review on appeal, decisions of the Commissioner of Internal Revenue and
the Commissioner of Customs in tax cases arising under the National Internal Revenue Code
and the Tariff and Customs Code and other laws administered by the Bureau of Internal
Revenue and the Bureau of Customs. (see Sec. 7[a]l, R.A. No. 1125, infra.) This court has
jurisdiction over disputed assessments of tax.

The Court of Tax Appeals is not a quasi-judicial agency but a regular court forming part of
the judicial system. Its decisions are now appealable to the Supreme Court.

(4) Ordinary courts. — The proper Regional Trial Court, the Metropolitan Trial Court, and the
Municipal Trial Court, as the case may be, are given exclusive original jurisdiction over civil
and criminal actions for the collection of internal revenue taxes and customs duties in cases
which are not within the appellate jurisdiction of the CTA, i.e., where the principal amount of
taxes and fees, exclusive of charges and penalties, claimed is less than P1,000,000.

The regular courts also exercise original jurisdiction for all criminal offenses arising from
violations of the National Internal Revenue Code, Tariff and Customs Code, and other laws
administered by the Bureau of Internal Revenue and the Bureau of Customs where there is
no specified amount claimed.

The jurisdiction of the Court of Tax Appeals shall be appellate. The regular courts are
likewise given jurisdiction over cases involving local taxes and special taxes not administered
by the Bureau of Internal Revenue and the Bureau of Customs.

(5) Supreme Court. —In tax cases, as in other cases, the Supreme Court is the court of last resort
to which an appeal or petition for review may be taken by the party adversely affected by a
ruling, order or decision of the Court of Tax Appeals or a Regional Trial Court. The appeal
may be made by the taxpayer or by the government, upon the instance of the Commissioner
of Internal Revenue or the Commissioner of Customs, as the case may be.

The Supreme Court has exclusive appellate jurisdiction in all cases involving the
constitutionality or validity of any law, or those involving the legality of any tax, impost,
assessment or toll, or any penalty imposed in relation thereto, and in all cases in which the
jurisdiction of any lower court is in issue, or in which only an error or question of law is
involved. (Secs. 1, 5[2], Art. VIII, Constitution, Chap. I-C.)

1. The Bureau of Internal Revenue; Organization; Jurisdiction, Power, and Functions of the
CIR

ORGANIZATION
Organization of the Bureau of Internal
Revenue.
(1) Chief officials and basic structure. — The Bureau of Internal Revenue is under one chief and
four (4) assistant chiefs known respectively as the Commissioner of Internal Revenue and
Deputy Commissioners of Internal Revenue. (see Sec. 3.)

The Bureau is divided into the National Office and the Field Service.
(2) National Office. — Its function is confined to general direction, guidance and control of the entire
operations of internal revenue service, national policy formulation and program planning for efficient
and effective implementation of internal revenue laws and regulations. It consists of the
Commissioner, the four (4) Deputy Commissioners, and the constituent units of the Bureau.

(a) The Commissioner is the chief executive

officer of the Bureau. He is appointed by the President upon recommendation of the Secretary of
Finance. He formulates the policies and administers the activities of the Bureau. He is given full
authority in matters of discipline and appointment of internal revenue
personnel. With the approval of the Secretary of Finance, he may make the necessary rules and
regulations as may be needed to delineate the authority and the responsibility of the various groups
and services of the Bureau. (Sec. 28, E.O. No. 127.)

(b) The Deputy and Assistant Commissioners

assist the Commissioner in supervising the administrative and operational activities of the Bureau.
They are appointed by the President upon the recommendation of the Commissioner and approval
of the Secretary of Finance.

(3) Composition of the Bureau. — The Bureau is composed of the following Groups and Services:

(a) Office of the Commissioner. — It has direct supervision over the following Services, each of
which is headed by an Assistant Commissioner:

1). The Internal Audit Service which is composed of four (4) divisions, namely: Information
Systems Audit Division, Fiscal Audit Division, Performance Audit Division, and Personnel
Investigation Division;

2) The Corporate Planning and Development Service which is composed of three (3)
divisions, namely: Strategic Management Division, Economic Research and Revenue Forecasting
Division, and Business Intelligence Division;

3) The Corporate Communications Service which is composed of three (3) divisions, namely:
Employee Communications Division, Public Affairs Division, and Taxpayer Communications
Divisions; and

4) The Finance Service which is composed - of three (3) divisions, namely: Budget Division,
Disbursement Accounting Division, and Revenue Accounting Division.

(b) Legal and Inspection Group. — This Group is supervised by a Deputy Commissioner and is
composed of the following Services, each of which is headed by an Assistant Commissioner:

1) The Legal Service which is composed

of three (3) divisions, namely: Law Division,
International Tax Affairs Division, and Appellate Division;
2) The Litigation and Prosecution Service
which is composed of two (2) divisions, namely
Litigation Division, and Prosecution Division;
3) The Legislative and Research Service.

(c) Information Systems Group. — This Group is supervised by a Deputy Commissioner and is
composed of the following Services:

1) The Information Systems Operations Service which is headed by an Assistant Commissioner

and is composed of four (4) divisions, namely: Systems Operations Division, Systems Support
Division, Security Management Division, and Systems Standards and Technology Management
Division;

2) The Information System Project Management Service; and

3) The Revenue Data Centers (RDCs) which

reports to the Deputy Commissioner for Information Systems Group and coordinates with regional
and district offices that they service. Each RDC is headed by a Revenue Data Center Head. It is
composed of two (2) divisions, namely: Computer Operations, Network and Engineering Division
and Facilities Management Division.

(d) Resource Management Group. — This Group is supervised by a Deputy Commissioner and is
composed of the following Services, each of which is headed by an Assistant Commissioner:

1) The Human Resource Development Service which is composed of four (4) divisions, namely:
Recruitment, Selection and Placement Division, Compensation, Benefits and Welfare Division,
Training and Development Division, and Career and Performance Management Division; and

2) The Administrative Service which is com-

posed of three (3) divisions, namely: Procurement Division, Accountable Forms Division, and
Properties and Records Management Division.

(e) Operations Group. — This Group is supervised by a Deputy Commissioner, and is composed
of the following Services, each of which is headed by an Assistant Commissioner, and all regional
offices:

1) The Large Taxpayers Service which is composed of two (2) divisions, namely: Banks,
Insurance and Service Sectors Division, and
Manufacturing, Industry and Agricultural Sectors Division. Likewise, the Large Taxpayers Service
has direct supervision over all Large Taxpayers District Offices in regions with identified large
taxpayers;

2) The Excise Taxpayers Service which is composed of five (5) divisions, namely: Alcohol, ‘Wine
and Liquor Sector Division, Tobacco, Cigar. and Cigarette Sector Division, Petroleum, Mineral and
Miscellaneous Sector Division, Data Reconciliation and Analysis Division, and Field Operations
Division. Likewise, the Excise Taxpayers Service has direct supervision over all Large -Excise
Taxpayers District Offices and Non-Large Excise Taxpayers District Offices in regions with identified
large and non-large excise taxpayers;

3) The Non-Large Taxpayers Service which

is composed of three (3). divisions, namely:
Banks Insurance and Service Sectors Division, Manufacturing, Industry and Agricultural Sectors
Division, and Emerging Industries / Business Sector Division;

4) The Individual Taxpayers Service which

is composed of three (3) divisions, namely Compensation Earners Division, Mixed Income Earners
Division, and Professionals, Employed, Estate and Trusts Division;

5) The Government and Tax-Exempt Entities

Service which is composed of three (3) divisions, namely: Government Agencies Division, Tax
Exempt Entities Division, and Special Taxpayers Division;

6) The National Investigation Service; and

7) The Regional Offices (ROs) which are directly under the supervision of the Deputy Commissioner
for Operations, execute and implement the policies and programs formulated and prescribed by the
Non-Large Taxpayers Service, Individual Taxpayers Service, and Government and Tax-Exempt
Entities Service for the enforcement of the internal revenue laws of the Philippines.

(4) Field Offices. — For an effective administration and control, the Philippines has been divided
into regional offices (ROs) which directly execute and implement the national policies and programs
prescribed by the National Office for the enforcement of internal revenue laws.

(a) Regional Offices. — Each office is headed by a Regional Director. He administers and enforces
internal revenue laws and regulations within his assigned Regional area, in conformity with the
delegation of authority from the Commissioner. He is assisted by an
Assistant Regional Director. A regional office covers several provinces (including cities).

Each Regional Office is responsible for directing and coordinating the operation of the following
Divisions: Assessment, Collection: Monitoring, Legal, Human Resource, Finance, and
Administrative Divisions.

(b) Revenue District Offices. — Under the regional offices are revenue district offices (RDOs)
headed by Revenue District Officers who are under the direct control and supervision of the Regional
Director.

The revenue district offices implement programs, methods and procedures necessary for the
efficient, effective, and economical assessment and collection of internal revenue taxes in the
revenue district in accordance with the policies, standards and guidelines prescribed by the National
Office and the Revenue Regional Offices. Each revenue district office is composed of fieldmen and
examiners performing assessment work and collection agents and clerks performing collection work.
They are the revenue personnel having direct contact in dealing with the taxpayers.
(5) Appointment, redeployment and assignment. —

(a) Appointment of officials. — All Deputy Commissioners, Assistant Commissioners, Regional

Directors, Revenue Data Center Heads and other holders of Director positions shall be appointed
by the President, upon recommendation of the Commissioner of Internal Revenue and approval of
the Secretary of Finance.

(b) Redeployment of personnel. — The redeployment of officials and other personnel on the basis
of the structural realignment embodied in Exec. Order No. 114 shall not result in diminution in rank
and/or compensation and shall take into account pertinent Civil Service laws and rules.

On the basis of the organizational changes in Exec. Order No. 114, the Commissioner shall, upon
approval of the Secretary of Finance, submit to the Department of Budget and Management (DBM)
for evaluation and final approval the resultant staffing pattern of the BIR. (Sec. 3, Ibid.)

(c) Implementing authority. — With the approval of the Secretary of Finance, the Commissioner
is authorized to determine the number of RDC’s, Ros and RDOs consistent with the requirements
of a computerized operation and the principles of economy, efficiency and effectiveness.

The Commissioner is likewise authorized to further organize divisions under the Services and
Offices authorized under Exec. Order No. 114, subject to DBM evaluation and approval. (Sec. 5,
Ibid.)

(d) Assignment of internal revenue officers and other Employees to other duties. — The
Commissioner may, subject to the laws on civil service, as well as the rules and regulations
prescribed by the Secretary of Finance upon the recommendation of the Commissioner, assign or
reassign internal revenue officers of the BIR without change in their official rank and salary, to other
or special duties connected. with the enforcement or administration of the revenue laws as the
exigencies of the service may require. (Sec. 6, Ibid.)
Note: A bill filed in the House of Representatives proposes the creation of a body corporate to be
known as the National Revenue Authority headed by a Chief Executive Officer (CEO), with fiscal
and administrative power, which shall be attached to the Department of Finance. In addition to its
corporate powers, the Authority shall exercise the powers and duties of the BIR under the Tax Code
and other pertinent laws. The bill also proposes the creation of an Internal Revenue Board (IRB)
with the Secretary of Finance as Chairperson. The IRB and the CEO are given specific powers and
duties.

JURISDICTION
1. Rules and regulations, as well as administrative opinions and rulings, ordinarily should deserve
weight and respect by the courts.
2. All such issuances must not override, but must remain consistent and in harmony with the law
they seek to apply and implement.
3. Administrative rules and regulations are intended to carry out, neither to supplant nor to modify,
the law.

1. Assessment and collection of all national internal revenue taxes, fees and charges;
2. Enforcement of all forfeitures, penalties and fines;
3. Execution of judgments in all cases decided in its favor (by the CTA and regular courts);
4. Give effect and administer the supervisory and police powers conferred to it by the NIRC and
other laws;
5. Recommend to the Secretary of Finance all needful rules and regulations for the effective
enforcement of the provision of the NIRC.

JURISDICTION of Commissioner re. tax cases

• The Commissioner has the power to decide: DRPO
1. disputed assessments;
2. refunds of the internal revenue taxes, fees, or other charges;
3. penalties imposed in relation thereto; or
4. other matters arising under this Code or other laws or portions thereof administered by the Bureau
of Internal Revenue

• This is subject to the exclusive appellate jurisdiction of the CTA.

POWER- BIR

Powers and duties, in general, of the Bureau of Internal Revenue.

(1) Principal functions. — They are the following:

(a) To assess and collect all national internal

revenue taxes, fees and charges;
(b) To enforce all forfeitures, penalties and fines connected therewith;
(c) To execute judgments in all cases decided
in its favor by the Court of Appeals and ordinary courts, particularly the Regional Trial Courts and
the Metropolitan and Municipal Courts;
(d) To give effect to and administer the supervisory and police power (see I, infra.) conferred to it by
law. (Sec. 2.) The Bureau of Internal Revenue may claim police power only when necessary in the
enforcement of its principal powers and duties in (a) and (b) above (Vera vs. Cuevas, 90 SCRA 379
[1979].);
(e) To recommend to the Secretary of Finance all needful rules and regulations for the
effective: enforcement of the provisions of the National Internal Revenue Code (Sec. 245, NIRC.);
and

(2) Other functions. — In addition, the Bureau, through the Commissioner, has the functions of:
(a) accounting for all revenues collected;
(b) exercising all legal requirements that are
appropriate;
(c) preventing and prosecuting tax evasions and other illegal economic activities;
(d) exercising supervision and control over its
constituent units; and
(e) performing such other functions as may be provided by law. (Sec. 28, E.O. No. 127.)
As earlier stated, the Commissioner of Customs and his subordinates are constituted agents of the
Commissioner of Internal Revenue with respect to the collection of the
national internal revenue taxes on imported articles (Sec. 12.), ie, value-added tax, excise taxes,
and documentary stamp tax; the head of the appropriate government office and his subordinates
with respect to the collection of energy tax; and duly authorized banks, with respect to receipt of
payments of internal revenue taxes, made to said banks.
(Ibid.) A customs collector is assigned to every port of entry. For the collection of the tax on private
vehicles (see Chap. II-M.), the Chief of the Land Transportation Office and his subordinates are
constituted agents of the Commissioner of the Internal Revenue.

Also constituted agents of the Commissioner of Internal Revenue are the head of the appropriate
government office and his subordinates with respect to the collection of
energy tax (Chap. II-N.) and banks duly accredited by the Commissioner with respect to receipt of
payments of internal revenue taxes authorized to be made through banks.
(Sec. 12.)

Authority of Commissioner to delegate

powers vested in him.
(1) General rule. — The Commissioner may delegate the powers vested in him under the pertinent
provisions of the Tax Code to any or such subordinate officials with the rank equivalent to a division
chief or higher, subject to such limitations and restrictions as may be imposed under rules and
regulations promulgated by the Secretary of Finance,
upon recommendation of the Commissioner.

(2) Exceptions. — The following powers of the Commissioner cannot be delegated by him:

(a) the power to recommend the promulgation

of rules and regulations by the Secretary of Finance;

(b) the power to issue rulings of first impression or to reverse, revoke or modify any existing ruling
of the Bureau;

(c) the power to compromise or abate any tax liability. However, 1) assessments issued by
the regional offices involving basic deficiency taxes of P500,000 or less, and 2) minor criminal
violations, as may be determined by rules and regulations, discovered by regional and district
officials, may be compromised by a regional evaluation board which shall be
composed of the Regional Director as Chairman, the Assistant Regional Director, the heads of the
Legal, Assessment and Collection Divisions and the Revenue
District Officer having jurisdiction over the taxpayer, as members; and

There are 19 Revenue Regulations Offices, with its regional center at Makati, Metro Manila. The
BIR is presently reorganizing the Revenue Regional Offices and Revenue District Offices.
(d) the power to assign or reassign internal revenue officers to establishments where articles subject
to excise tax are produced or kept. (Sec. 7.)

Under letter (c), the power to abate or cancel a tax liability or any portion is exercised exclusively
by the Commissioner. Subordinate internal revenue officers may only recommend. There are only
two (2) cases when a tax liability may be compromised without the intervention of the
Commissioner.

FUNCTIONS OF THE COMMISSIONER OF INTERNAL REVENUE (CIR)

a) Interpreting Tax Laws and Deciding Tax Cases

b) Non-Retroactivity of Rulings

2. RULE-MAKING AUTHORITY OF THE SECRETARY OF FINANCE

NIRC, SEC. 244. Authority of Secretary of Finance to Promulgate Rules and Regulations. -
The Secretary of Finance, upon recommendation of the Commissioner, shall promulgate all needful
rules and regulations for the effective enforcement of the provisions of this Code.

3. DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES

- It says that a person challenging an agency decision must first pursue the agency's available
remedies before seeking judicial review. It was created by courts in order to promote an efficient
justice system and autonomous administrative state.

Taxpayer must await the lapse of the 120-day period before taxpayer can appeal to CTA.

The second paragraph of Section 112(D) of the NIRC envisions two scenarios:

(1) when a decision is issued by the CIR before the lapse of the 120-day period; and

(2) when no decision is made after the 120-day period.

Note:
-In both instances, the taxpayer has 30 days within which to file an appeal with the CTA. As we
see it then, the 120-day period is crucial in filing an appeal with the CTA (CIR v. Aichi Forging Company
of Asia, Inc., GR 184823, October 6, 2010).
-Failure to comply with the 120-day waiting period violates a mandatory provision of law. -It
violates the doctrine of exhaustion of administrative remedies and renders the petition
premature and thus without a cause of action, with the effect that the CTA does not acquire
jurisdiction over the taxpayer's petition.

4. COURT OF TAX APPEALS (CTA)

a. Exclusive Original and Appellate Jurisdiction Over Civil Cases

b. Exclusive Original and Appellate Jurisdiction Over Criminal Cases

c. Procedures

1. Filing of an Action for Collection of Taxes

a) Internal Revenue Taxes
b) Local Taxes

d. Civil Cases

1) Who May Appeal, Mode of Appeal, and Effect of Appeal

2) Suspension of Collection of Taxes
3) Injunction Not Available to Restrain Collection

e. Criminal Cases

1) Institution and Prosecution of Criminal Action

2) Institution of Civil Action in Criminal Action
3) Period to Appeal

f. Appeal to the CTA En Banc

g. Petition for Review on Certiorari to the SC

B. STATUTE OF LIMITATIONS

1. Assessment of Internal Revenue Taxes

a) Procedural Due Process in Tax Assessments

No arbitrariness or oppression either in the assessment or collection

b) Requisites of a Valid Assessment

C) TAX DELINQUENCY VS. TAX DEFICIENCY

D) PRESCRIPTIVE PERIOD FOR ASSESSMENT page 333 de leon

(1) General rule. — Where a return was filed, the period for assessments is within three (3) year
after the date the return was due or was filed, whichever is later. Under the Tax Code, a return filed
before the last day prescribed by
law for the filing thereof, is considered as filed on such last day. If the return is filed beyond the
period prescribed by law, the three-year period shall be counted from the date the
return was filed. (see Sec. 203, NIRC.)

Thus, if the income tax return for the 2015 income was due on April 15, 2016 and the taxpayer filed
his income tax return on March 10, 2016, the three (3)-year period is counted from April 15, 2016;
but if he filed his return on April 25, 2016, then the period is counted from this latter

(2) Exceptions. —
(a) Where there is a failure to file the required return, the period is within ten (10) years after the
date of the discovery of the omission to file return (see Sec. 222[al.) In this connection, it is
immaterial that the taxpayer believed in good faith that he had no tax liability;

(b) Where there is a return filed but the same is false or fraudulent and made with intent to evade
the tax, the period is also ten (10) years from the date of the discovery of the falsity or fraud. (see
Sec. 222[a].)

Anent fraud, the general rule is that it is never presumed and the circumstances constituting it
must be alleged and proved to exist by clear and convincing evidence;
Fraud is never to be lightly presumed because it is a serious charge, although it need not be proved
by direct evidence since fraud is a state
of mind. The fraudulent intent to evade payment of taxes cannot be based merely on a presumption
or deduced from mistakes where there is no indication in the record of any act of bad faith committed
by the taxpayer. However, in a fraud assessment which has become final and executory, the fact of
fraud shall be judicially taken cognizance of in the civil or criminal action for the collection of the tax.
(Sec. 222[a].) -

(c) Where the Commissioner of Internal Revenue and the taxpayer before the expiration of the three
(3)-year period of limitation have agreed in writing to the extension of the period, the period so
agreed upon may be extended by subsequent agreements in writing made before the expiration of
the period previously agreed upon. (see Sec. 222[b].) The Commissioner cannot validly agree to a
reduction of the prescriptive period prescribed by law to the detriment of the State, since it diminishes
the opportunities of collecting taxes due to the government.

(d) Where there is a written waiver or renunciation of the original three (3)-year limitation signed by
the taxpayer. The Bureau
of Internal Revenue requires that all requests for reconsideration of a tax assessment must be
accompanied by a waiver of the statute of limitations duly accomplished by the taxpayer.
Date of discovery of falsity or fraud, or failure to file return.
It is essential that the discovery of the falsity or fraud or of the period to file must have been
within the 3 year period following the general rule. The exceptions (a) and (b) above, refer to the
ten-year period when assessment may be made from the date of such discovery by the BIR which
makes the period to assess practically imprescriptible.
Obviously, the discovery period (e.g, after 20 or 30 years) cannot be without time limit. The
taxpayer must have the assurance that he will no longer be subject to investigation of taxes after
the expiration of a reasonable period of time.
However there is no time limit on the right of the Commissioner to assess unpaid tax, the
basis on which is not requires by law to be reported in a return such as excise taxes on certain
articles. There is no law requiring the filing of return for excise taxes.

Prescriptive periods for collection.

(1) General rule. —
(a) Where an assessment was made, the period for collection by the government by distraint or levy
or by a proceeding in court is within five (5) years following the date of assessment. (see Sec. 222[c)

(b) Where no assessment was made and a return was filed and the same is not false or fraudulent,
the period for collection by a proceeding in court is within three (3) years after the return was due or
was filed, whichever is later (see sec. 202).

(2) Exceptions. —
(a) The exceptions relative to the prescriptive
periods for assessment are also applicable. Any internal revenue tax which has been assessed
within the period agreed upon may be collected by distraint or levy or by a proceeding in court within
the period agreed upon in writing before the expiration of five (5) years following the assessment of
the tax. The period so agreed upon may be extended by subsequent written agreement made before
the expiration of said period previously agreed upon. (Sec. 222{d].)

Thus, assuming that the last day for assessment was November 10, 2016, but by agreement in
writing on or before said date, the period was extended to December 31, 2016, if the assessment
was made on December 20, 2016, the government has five (5) year from December 20, 2016 within
which to collect. The period, December 31, 2016, may be extended before it expiration by
subsequent written agreement.
If assessment is made within ten (10) years after the discovery of the falsity, fraud or omission, the
collection by judicial action or by distraint or levy must be made within five (5) years after assessment
following the general rule; otherwise, the right of the government would prescribe although the
collection is made within the said period of ten (10) years.

By way of Illustration, where the fraud was discovered in 2009, the period for assessment or
collection is up to 2019. If the assessment, however, was made in 2012, the period for collection is
within five years from 2012 or up to 2017. Hence, collection in 2018 will be late although it is earlier
than 2019. On the other hand, if the assessment is made in 2015, the government has the right to
collect until 2020.
(1) False Returns vs. Fraudulent Returns vs. Non-Filing of Returns

(2) Suspension of the Running of Statute of Limitations

2. Period within which the government could collect (Sections 203, 222, NIRC)

Republic v. Hizon, GR No. 130430, 13 December 1999

CIR v. Javier Jr., GR No. 78953, 31 July 1991 (199 SCRA 825
PNOC v. CA, GR No. 109976, 26 April 2005
BPI v. CIR, GR No. 174942, 7 March 2008

3. Period within which the action may be filed

i. Civil Cases (Sections 203, 222, NIRC)
ii. Criminal Cases (Title X, Sec 281, NIRC)

4. Cases:
a. Republic v. Hizon, GR No. 130430, 13 December 1999 (re approval of filing of civil and criminal
action)
b. CIR v. La Suerte Cigar, G.R. No. 144942, 4 July 2002 (Re participation of the Office of the Solicitor
General)
c. PNOC v. CA, G.R. No. 109976, Apr 26, 2005
d. Lim v. CA, GR Nos. 48134-37, 18 October 1990, 190 SCRA 616 (re prescription of criminal actions,
Section 281, NIRC)

e. Marcos II v. CA, GR No. 120880, 5 June 1997 (re enforcement of tax liability during pendency of
probate proceedings)

C. Remedies of the Taxpayer page 341 de leon

I. Before Payment
1. Protest (Section 228, NIRC)

a. Requirements of a valid protest—Rev. Regs. 12-85

b. Cases
CIR v. Wyeth Suaco Laboratories, GR No. 76281, 30 Sept 1991 CIR v. Atlas Consolidated Mining, GR
Nos. 31230-32, 14 Feb 2000
Lascona v. CIR, CTA Case 5777, 4 January 2000 vis-à-vis Section 7 (2), RA 9282 and the Revised
Rules of Procedure of the CTA, AM No. 05-11-07-CTA
CIR v. Union Shipping, GR No. 66160, 21 May 1990, 185 SCRA 548 and CIR v. IsabelaCultural
Corporation, GR No. 135210, 11 July 2001
Protector’s Servicesv. CA, GR No. 118176, 12 April 2000

2. Compromise

II. After Payment

1. Refund (Section 229, NIRC)
a. Must be strictly construed against the taxpayer—
Citibank, NA v. Court of Appeals, GR No. 107434, 10 October 1997, 280 SCRA 459;
FEBTC v. CIR, GR No. 138919, 02 May 2006

b. Grounds for filing a claim for refund (See Section 229,

Engtek Phils v. CIR, CTA Case No. 6644, 26 January 2005)

c. Period within which to file a claim for refund

i. General rule is two years from the date of payment

ACCRA Investments Corporation v. Court of Appeals, GR No. 96322, 20 December 199
CIR v. TMX Sales, 15 January 1992
CIR v. PhilAm Life, 29 May 1995
CIR v. CA and BPI, GR No. 117254, 21 January 1999

ii. exception to the 2-year period:

CIR v. PNB, GR No. 161997, 25 October 2005

CIR v. Primetown Property, GR No. 162155, 28 Aug 2007.

ii. In case of amended returns

iii. In case of taxpayers contemplating dissolution

BPI v. CIR, 28 August 2001; See also: Sections 52(c) and 56(a)

d. Who has the personality to file a claim for refund?

CIR v. Procter and Gamble, GR No. 66838, 16 Dec 1991; CIR v. CA, 20 January 1999
Silkair v. CIR, GR Nos. 171383 & 172379, 14 Nov 2008

e. Is setting-off of taxes against a pending claim for refund allowed?

—The doctrine of equitable recoupment—

Philex Mining Corp. v. CIR, GR No. 125704, 28 Aug 1998

f. Is automatic application of excess tax credits allowed? (Sec. 76)
Calamba Steel v. CIR, GR No. 151857, 28 April 2005
Systra Philippines v. CIR, GR No. 176290, 21 September 2007 CIR v. BPI, GR No. 178490, 07 July
2009 (Irrevocability Rule)

g. Effect of existing tax liability on a pending claim for refund

CIR v. CA and Citytrust, GR No. 106611, 21 July 1994
h. Period of validity of a tax refund/credit (Sec. 230, NIRC)
i. Returns are not actionable documents for purposes of the rules on civil procedure and evidence
Aguilar v. CIR, CA Case dated 30 March 1990)

j. Refund and Protest are mutually exclusive remedies—

Case: Vda. De San Agustin v. CIR, 10 September 2001

k. Is the taxpayer entitled to claim interest on the refunded tax? (Sec. 79 (c) 2, NIRC)

2. Other Remedies
a. Action to Contest Forfeiture of Chattel (Sec. 231)
b. Redemption of Property Sold (Sec. 214)

C. Remedies available to the government

Enumeration of remedies available

to government.
Before we go to a detailed discussion of the different remedies that may be availed of by the
government to collect taxes, it will be useful to give a resumé of said remedies.
(1) Administrative:
(a) Distraint of personal property;
(b) Levy of real property;
(c) Enforcement of forfeiture of property;
(d) Enforcement of tax lien;
(e) Entering into compromise of tax cases;
(f) Requiring the filing of bonds;
(g) Requiring proof of filing income tax returns;
(h) Giving of rewards to informers;
(i) Imposition of surcharge and interest;
(j) Making arrest, search and seizure;
(k) Deportation of aliens;
(1) Inspection and examination of books of
accounts;
. (m) Use of the national tax register;
(n) Obtaining information on tax liability of any
person;
(0) Inventory taking of stock-in-trade and
making surveillance;
_(p) Prescribing presumptive gross sales and
receipts;
(q) Termination of the tax period (see B, supra.);
(r) Prescribing real property values;
(s) Inquiring into bank deposit account; and
(t) Requiring registration of taxpayers.

Note: A tax clearance is no longer required tor purposes of travel. (Sec. 7, P.D. No. 1205, which
repealed Sec. 5 of P.D. No. 1183; see Chap. II-L.)
(2) Judicial:
(a) Ordinary civil action; and
(b) Criminal action.

Except criminal action, all the above are civil remedies for the collection of taxes. Distraint and levy
are the ordinary summary remedies.
Continue to page 279, de leon

a. No injunction to restrain collection of taxes (Sec. 218, NIRC)

b. Period within which the government could collect (Sections 203, 222, NIRC)

Republic v. Hizon, GR No. 130430, 13 December 1999

CIR v. Javier Jr., GR No. 78953, 31 July 1991 (199 SCRA 825
PNOC v. CA, GR No. 109976, 26 April 2005
BPI v. CIR, GR No. 174942, 7 March 2008

c. Overview of Remedies (Section 205)

1. Tax Lien (Section 219, NIRC)
a. CIR v. NLRC, GR No. 74965, 9 November 1994
2. Compromise
3. Distraint and/or Levy
4. Civil Action
5. Criminal Action
6. Forfeiture
7. Suspension of business operations
8. Enforcement of administrative fines

d. Administrative Remedies in Detail (Sections 206-217, NIRC) page 309 de leon

1. Distraint
a. Actual
b. Constructive
2. Levy
3. Garnishment
e. Judicial Remedies in Detail (Section 220, NIRC) page 326 de leon
1. Period within which the action may be filed
i. Civil Cases (Sections 203, 222, NIRC)
ii. Criminal Cases (Title X, Sec 281, NIRC)

f. Where should these cases be filed?

a. Criminal Cases (See the imposable penalty vis-à-vis the jurisdiction of courts)

b. Civil Cases (Consider the amount of tax sought to be collected vis-à-vis the jurisdiction
of courts, together with the provisions of RA9282)

g. Cases:
a. Republic v. Hizon, GR No. 130430, 13 December 1999 (re approval of filing of civil and criminal
action)
b. CIR v. La Suerte Cigar, G.R. No. 144942, 4 July 2002 (Re participation of the Office of the Solicitor
General)
c. PNOC v. Court of Appeals, G.R. No. 109976, Apr 26, 2005
d. Lim v. CA, GR Nos. 48134-37, 18 October 1990, (re prescription of criminal actions, Section
281,NIRC)
e. Marcos II v. CA, GR No. 120880, 5 June 1997 (re enforcement of tax liability during pendency of
probate proceedings)
f. Judy Anne Santos v. People, GR No. 173176, 26 August 2008

D. Effects of failure to pay the tax on time:

Additions to the tax (Chapter I, Title X, NIRC)

1. Surcharges
a. Ordinary (Section 248A, NIRC)
i. Failure to pay tax on time as required by the tax code or the regulations
ii. Failure to pay the deficiency tax within the time fixed in the notice
iii. Filing of the return with the wrong office

b. Fraud Penalty (Section 248B, NIRC)

i. CIR v. Javier Jr., GR No. 78953, 31 July 1991.199 SCRA 825

2. Interest (Section 249, NIRC)

a. In General
b. Deficiency Interest
c. Delinquency Interest
d. On Extended Payments

3. Compromise Penalties
4. Effect of failure to file information returns (Section 250, NIRC)